DALLAS -- Record ridership is just one of several credit positives for public transit agencies, Moody's Investors Service said Monday in its latest weekly credit outlook.
Transit buses and trains posted 10.7 billion passenger trips in 2013, marking the highest ridership level in 57 years, the American Public Transit Association said earlier this month.
"Strong ridership is credit positive for U.S. mass transit authorities," Moody's said. "Fare revenues likely rose in 2013 as ridership increased."
Increases in local and state sales tax revenues due to a recovering economy are also positive for the public transit sector, Moody's said. More than half of the transit agencies with rated debt rely on dedicated sales tax revenues for capital projects as well as operating expenditures.
"Increased ridership reflects economic improvement, in particular post-recession employment growth," said Andrew Nowicki, principal analyst on the Moody's report.
"Stronger employment results in increased disposable income and consumer demand, which in turn leads to increasing sales taxes" he said.
The 1.1% increase in ridership in 2013 continued a now eight-year trend of more than 10 billion transit trips a year, APTA said.
The 1.5% overall increase in public transit ridership in 2012, along with some fare increases, resulted in a 4% overall increase in fare revenues that year, Moody's said.
Steady increases in ridership levels support APTA's push for $100 billion of federal transit grants over six years in the next multi-year surface transportation bill, Moody's said.
"Strong ridership indicates positive public sentiment towards public transportation, which can lead to increased political support and help advance broad-based transportation initiatives," the report said.
Federal transit grants are typically dedicated to infrastructure projects and expansion projects add potential passengers that further increase fare revenues, Moody's said.
"If the [$100 billion] request is approved, additional grant revenue will result in positive credit pressure in addition to increased fare revenue," the rating agency said.
President Obama's proposed $302 billion, four-year transportation program includes $72.3 billion for transit. The administration's proposed fiscal 2015 budget provides $22.3 billion for public transit, up from $10 billion in fiscal 2014.
The current two-year transportation program, Moving Ahead For Progress in the 21st Century, expires on Sept. 30.
In addition to a boost in fare revenues thanks to more riders, Moody's said systems with sales tax debt reported an increase in tax collections last year.
The 29 transit systems that issue bonds supported by sales tax collections saw a median revenue growth of 5.4% last year, Moody's said.
Public transit system revenues include a high level of external subsidization from grants by federal, state, and local governments with fare box revenues accounting for an average of 36.5% of operating revenues, according to the rating agency.
California's San Joaquin Regional Rail Commission, whose revenue debt is rated A2 by Moody's, tops the list of rated agency fare recovery ratios by generating 64% of its expenses from fares.
Pennsylvania's Port Authority of Allegheny County and Missouri's Bi-State Development Agency tied for second with 41% of expenses paid from fares.
